"Emerald Sea" by John Ringo (Book 2 of 4, Council Wars)

The fast-paced sequel to "There Will be Dragons" is a rollicking adventure above and below the high seas with dragons, orcas, beautiful mermaids and the irrepressible Bast the Wood Elf, a cross between Legolas and Mae West. Duke Edmund Talbot has been assigned a simple mission: Go to the Southern Isles and make contact with the scattered mer-folk-those who, before the worldwide collapse of technology, had altered their bodies in the shape of mythical sea-dwelling creatures. He must convince them to side with the Freedom Coalition in the battles against the fascist dictators of New Destiny. Just a simple diplomatic mission. That requires the service of a dragon-carrier and Lieutenant Herzer Herrick, the most blooded of the Blood Lords. Because New Destiny has plans of its own.